What’s the current state of legal outsourcing? Depends on what factors you give the most weight to. Four items came together this week to provide excellent perspective on legal process outsourcing (LPO).  

US Legal Outsourcing $2 billion by 2013. Over at Integreon.com (my employer), I wrote a blog post yesterday, Survey Suggests US LPO Spending of $2 Billion by 2013. Based on a recent survey and “some conservative assumptions, we estimate that U.S. corporate law departments will spend about 3% of their budget on legal outsourcing. This translates to US legal process outsourcing (LPO) spending in 2013 of almost $2 billion.” You can read in gory detail exactly how I derive the market size estimate. I think that represents a very high growth rate.

LPO Doubt Continues. India Work Grows, With Glitches (The National Law Journal, 9 Dec 2008) is a “on the one hand, on the other hand” story. It suggests a growing market and that cost pressures bode well but reports concerns about outsourcing management challenges and ethics. And it focuses a bit heavily in my view on the recent Mumbai attack. Legal outsourcing is about how lawyers can delegate work to appropriate resources, not where. There are many LPO destinations; India happens to be the one getting the most press. In a future post, I will discuss in more detail how the reaction to LPO mirrors legal market adoption of many other new ways in the last two decades.

Cost Pressure is Up – Which Way Does That Cut? At the risk of stating the obvious, the need for cost savings is growing. According the just released (9 Dec 2008) Altman Weil Flash Survey on Law Department Cost Control, “75% of responding General Counsel indicated that their law departments are facing budget cuts averaging 11.5% for 2009. An additional 15.6% reported that their budgets would increase by a smaller percentage than in prior years.” How many ways beyond outsourcing can the typical GC name to do more with less?

Is the Usual Approach Really So Great? The NLJ article and many others report on concern about quality offshore. Yes, lawyers need to perform due diligence on any resource they use. So too should they on the typical contract lawyer approach. Read Down in the Data Mines in the December ABA Journal. This is a sobering first person account of a well-trained lawyer doing doc review. I’ve read other similar accounts. Assuming this is representative (my friends who manage BigLaw reviews suggest it is), how any lawyer can read this and still assume onshore=good and offshore=bad takes logical power and/or facts I lack. Or perhaps they have not visited the well-run, process-driven, spirited, and highly secure review center of a reputable LPO (like the one for which I now work).

Update (11 Dec 2008) Turning to India at break-neck speed by Richard Susskind in the TimesOnline reports on the rise of LPO in the UK, based on an RSG Consulting report. Factoid: 10 of the top 30 firms in England have “outsourced back office functions or legal work to India.”

Updated (13 Dec 2008) Blogger Adam Smith, Esq. writes a very thoughtful, in-depth analysis of the current crisis, “Structural Breaks” and Other Timely Phenomena. He provides a great historical perspective on past crises and the response of government and business. At the end, he draws the lessons law firms can learn; among them:

“Just because you’ve “always” done something, do you need to? … Have you outsourced your cafeteria? (I hope so!) Your mail room and your 401(k) administration? (Ditto.) Your word-processing? (On-deck circle.) Your document review? (Time to think about it.)”

Updated (13 Dec 2008) An older item but a good in depth article on legal outsourcing: Offshoring legal work: do lawyers risk outsourcing themselves? (Law Society Gazette, 27 Nov 2008). This is a nice analytic piece with good examples from UK, especially Eversheds. Hat tip to Mark Ross of LawScribe, who is also quoted in the article

Update (22 Dec 2008) Barrons has a short item, Exported Expertise, Lawyering Long-Distance (22 Dec 2008) quoting one vendor saying LPO growth prospects are hot.

[Hat tips to The Common Scold and complexd at http://twitter.com/wrrobinson for the Altman Weil study and to Legal Blog Watch, The Disturbing Side of Life as a Contract Attorney – a blog post on this article worth reading.]